The iconic blue jeans market

This is the challenge that motivated three young entrepreneurs by creating “Les Ateliers de Nîmes”, jeans brand impregnated by the Gard history: old looms, hessian called Sergé de Nimes designed for workers and farmers, well before Levis Strauss did make the world known 501.

Making reborn a disappeared expertise from its ashes: that is the craziest objective of Guillaume, Anthony & Werner … who proudly declare that the Levi’s & Jacob Devis patent regarding riveted pockets had been created well after the Nîmes famous and robust weaving process.

According to Guillaume: “At the time, Nîmes manufacturers wanted to copy the hessian of Gènes, they created the twill fabric which is a technique of weaving wool and silk. In truth, this hessian has nothing to do with the one used today. »

So, why did this know how suddenly disappear?

Our entrepreneurs explain this phenomenon by the Nîmes Protestants escape to the USA, during the edict of Nantes revocation.

Is the project ready?

After several prototypes, 3 hessians have been selected to launch the first collection of “Les Ateliers de Nîmes” … which will be available on January 2015. Still working with foreign suppliers, our frenchies have a final objective: produce a hessian 100% from Nîmes in maybe ten years…

If you want to read more about this ambitious project, please click right here:

Today, we are going to analyse level of competition within the denim industry and its business strategy development through Porter Five Forces analysis.

This theory is based on the concept that there are five forces that determine the competitive intensity and attractiveness of a market.

Let’s see together which are the five forces and their degree.

The threat of new entrants: HIGH

The denim market has changed considerably since the 1990s and Levis, who had a virtual monopoly on the jeans market, now is facing a much stronger competition. Indeed, today the barriers to entry the jeans market are lower and lower. In almost all the countries, there is no specific government policy to protect denim brands from others when new brands enter into the market. Moreover, companies can take advantage of the presence of several jeans distribution channels in the world.

In order to save time and money, companies can also choose to sell directly their products on the internet. This method enables competitors to respond even faster to the customers’ changing demand.

Threat of substitution: HIGH

One of the main factors determining the intensity of competition in the denim market is the presence of substitutes. A substitute product is defined as a different product from the target product, but can satisfy the same need.

We can see that sales of blue jeans fell during the past year. This decline is mainly due to a change in the women life style. Indeed, women are more often wearing leggings, yoga pants, sweatpants and other athletic pants instead of traditional denim. This new trend is called “athleisure”.

The “athleisure” trend seems to be the biggest threat facing jeans because it reflects a fundamental lifestyle change. In order to tackle this new trend, denim brands have to create new versions of classic denim that are more “stretchy” and with the same comfort as sweatpants or leggings.

Climatic conditions have also an impact on purchasing decision of customers. They are likely to switch to other products considering the climate conditions (winter or summer).

The bargaining power of customers: HIGH

The bargaining power of customers means in the analysis of Michael Porter the ability of customers to accept products offered by companies. The bargaining power of customers actually means the purchasing power possessed by customers in the denim market.

Today competition is strong in the denim market and jeans are a common product that we can buy in any clothes shop at almost the same price. However, customers are more and more exigent regarding denim design because they want to be fashion. Sales of jeans fell during the last year because of a lack of new designs. Jeans are become a mainstream product. So the role of the denim brands is to succeed in transforming a common product into a fashionable product with a strong identity.

The bargaining power of customers is a major force in determining the competition in the jeans industry and the strong competitive pressure increases the communication efforts of denim brands to inform customers.

The bargaining power of suppliers: MEDIUM

In a highly competitive environment, bargaining power of suppliers takes into account the ability for companies to source within the market. It is indeed for denim companies to ensure the availability of raw materials needed to manufacture their products.

Today, the competition between suppliers in the denim market is more important than before. It is because suppliers are more dispersed than before that their bargaining power is less important. Indeed, we can note that new emerging suppliers are among the main suppliers of denim brands. The China monopoly is no longer current in the denim industry because of the entry of new suppliers like Bangladesh, Vietnam, Pakistan, Ethiopia or Turkey. In this way, if suppliers increase their costs, jeans companies can easily find another factory.

However, Jeans companies have no power on raw materials cost and if there is a rise of cotton cost, it will have repercussions on jeans prices.

Industry rivalry: HIGH

Nowadays, competition is strong on the denim market. Levi’s is threatened by competition, because barriers of entry are relatively low in the jeans market. So there is a wide range of brands in the denim market: Levi’s, Diesel, Lee Cooper, Calvin Klein, Tommy Hilfiger etc.

In this way, consumers can easily switch to another brand especially since they are less brand loyal. Moreover, the level of product differentiation is weak because jeans are become a common product with a similar production method and almost the same price.

A new fashion trend has also an impact on the degree of competition with the production of new products like leggings. Indeed, the competition that jeans are facing from other product categories is intensified by the disappointment of consumers about changes in the quality of fabric and the lack of new designs. All these aspects increase the intensity of competitive rivalry in the denim industry.

As we saw before in the article « Levi’s vs Diesel : an old story », Levi’s and Diesel have historically built up different brand strategies. Levi’s is much more seen as a conventional and traditional brand than Diesel, since the Italian company has always aimed at shocking people by promoting provocative commercials.

Every year, while promoting its new collection, Diesel delivers controversial campaigns to create a marketing buzz. This has been the case for campaigns like « Be stupid », « Global Warming Ready » or « Live fast » for example.

Please find hereunder some pictures of those campaigns :

The title of the campaign « Be stupid » talks about itself; while « Be Smart » is what our parents and teachers told us since we were young, what to think about « Be stupid » ? Diesel is constantly and undeniably playing with it customers. While Levi’s is working on proximity with its fans, Diesel defies them : « New boots are rough and tough. Will you dare to wear? »

Let’s now focus on one of the last compaigns of Diesel to better understand their strategic brand management.

The #Dieseltribute is a 2013 campaign based on Formichetti’s first collection in collaboration with Nick Knigh. Formichetti, the new Diesel Artistic Director, embodies inventive and imaginative forces in the company. He is known as a frequent collaborator with singer-songwriter and performance artist Lady Gaga. Nick Knight is amongst the world’s most influential and visionary fashion photographers, always challenging the notions of beauty by using new technologies.

What makes the #Dieseltribute campaign so unique is that it was shot by Nick Knight entirely on an iPhone using apps such as Glitché, MegaPhoto and Instagram. The campaign has been distributed across specific social platforms like Tumblr, Facebook and Instagram, and nothing else. Dieseltribute tells us the story of how art and digital meets fashion.

What is important to see here, is that this campaign has been made for digital communication only. Magazines have not been used in this campaign. As Nicola Formichetti says, « I want to speak the language of digital community.” So the customers necessarily needs to understand and use the digital and it cannot be anyone who can be targeted.

It it generally assumed that Diesel ads appear to be « weird » or « bizarre ». And this is how it works, this is how Diesel makes the difference. Contrary to Levi’s, Diesel does not address to anyone, it addresses to young people who have the strong feeling of belonging to the youth culture. Nicola was not hired by chance, he was hired mainly because he is forever championing youth culture by reinforcing the importance of social media and embodies the spirit of Diesel :

« I’m open to everything.I’m not an evangelist.I love embracing new things. »

To conlude, through its ads, Diesel gives the impression of maintaining a closed circle exclusively reserved to people who understand their messages and who are sensitive to their ads and art. Diesel creates this sense of community and its fans repay it well in return.

It is time now to concentrate on the advertising strategy of the leading brands in the jeans industry !

In this article we will mostly concentrate on Levi’s strategy since the company has launched a new compaign on July, which marked a turning point in the advertising strategy of Levi’s. Although Levi’s appears to be a more conventional brand than Diesel, we will see that for the past few years, the main concern of Levi’s has been to determine “how do we connect this 150-year-old brand with what is happening in the youth culture today.”, as Doug Sweeny, vice president for Levi’s brand marketing said. Therefore, they tried to reinvigorate the image of the brand while using more creativity in their ads to turn them into more unconventional ads. But we will see it also caused controversy at a certain point.

Indeed, for the five past years, Levi’s has been working with Wieden + Kennedy on a compaign called “Go forth”. Through this campaign, Levi’s tried to appeal to young consumers with a striking motto “Go forth” and featuring sentences as “Strike up for the new world” or “Tough as your spirit”.

The concern of this campaign was how to resonate with young American people the same way they did two decades ago with the “501 blues campaign” and “501 USA”. As Jennifer Sey, CMO at Levi’s said: “Levi’s has a rich history, steeped in American ingenuity and bravery. We wanted this campaign to pay homage to that heritage, but also to refresh and reinvent the idea of a pioneering spirit for the times in which we live» And indeed, the word “pioneer” was used in the title of the second spot in the campaign called “oPioneers!”.

Hereunder can be found the commercial :

Let’s describe the video : when you first watch it, you don’t know exactly what it refers to; is it a new movie, a commercial, a music video ? You don’t know.
Above all, the soundtrack of the commercial is based on a poem written by Whitman, Pioneers ! O pioneers!. The word « pioneer » is said over and over again within the ad; this powerful word rings out all along the commercial while the characters keep running through fields, on the beach, in mobs, and set fire. In the middle of the video, we can see a striking image of a young woman casting her hand high above her head which echoes to a signature Nazi gesture. All those elements make us clearly understand that the commercial is promoting something more than just jeans. The commercial appeals to young American people to trust themselves and go forth to change society. The very fast images coupled with the determined, slow and solemn voice convey a very strong feeling as if it promoted something revolutionary. The ads were run in newspapers near reprints of the Declaration of Independence for the Fourth of July. In this sense, the campaign has been controversial. Some said “They’re only pants !” while others saw an appeal to bring anarchy.

But Levi’s realized they kind of have been too far in this campaign and decided that they needed to refocus their strategy on what is essential to the brand : the Levi’s heritage. As Jennifer Sey, CMO at Levi’s said : “The recent efforts from previous agency Wieden + Kennedy, themed « Go Forth, » weren’t cynical, exactly, nor dour nor overly serious, though some observers believe they worked too hard to be cool, plugging into the zeitgeist while sacrificing Levi’s unique heritage. I kind of agree. There were some memorable moments, but, overall, « Go Forth » seemed to be flying by the seat of its pants, chasing random hipness.”
Thus, the Live in levi’s project was born (http://www.levi.com/GB/en_GB/liveinlevis). On July 2014, while promoting the Levi’s Fall-Winter 2014-15 collection, the company announced its new global brand campaign, « Live in Levi’s, » the first project developed out of a unique collaboration between FCB — Foote, Cone & Belding, The House Worldwide and the Levi’s brand. The principle is simple : Levi’s is asking its fans to submit videos of them wearing a pair of Levi’s jeans in their dailylife on Facebook, Twitter or Instagram using the hashtag #LiveInLevis. The campaing has been broadcasted through TV commercials, posters, online communication using featuring phrases like « Share how you live in Levi’s », « Started by us. Finished by you » or « Love your Trucker? Tell its story with #LiveinLevis ».

According to the company, it is more than a campaign ““It’s an optimistic, new direction that reconnects the brand to its soul.” The live in Levi’s project has been made to retarget everyone, to open the brand back up to everybody while they had mainly targeted young people during the past few years. This project is a real turning point into the advertising strategy of Levi’s. As Eric Springer, chief creative officer of the FCB West unit of FCB, which is working on the Levi’s campaign said about the “go forth” campaign : “It got a little too hipster, a little too artsy,” and “the voice needed to be tweaked” to “open the brand back up to everybody.”

Through this compaign, Levi’s is using a non-traditional manner to feature its products while encouraging its fans to authentic self-expression. It creates proximity with the customers and reinforces the link between the longtime Levi’s jeans and the fans. Moreover, as it is fun and interactive, it brings visibility, everyone can see it via the social media and everyone is likely to become the fans of tomorrow. It is a good way of making its fans loyal and attract new fans around the world.

According to Kantar Media, a unit of WPP, Levi Strauss spends less and less money in advertising as they spent $26.7 million last year on ads in major media in the United States, compared with $40 million in 2012, $42.6 million in 2011, $71.5 million in 2010 and $61.5 million in 2009.

Today we will analyse the macro-environmental factors (i.e. external marketing environment) that have an impact on denim industry through a PESTEL analysis.

Lets look at each of these macro-environmental factors in turn.

POLITICAL:

Promotional activities are regulated in all countries by legislation.

ECONOMIC:

Global economic crisis context: the economic crisis of 2008 has affected the purchasing power of consumers, which is an important determinant of the size of a market.

The stage of the economic development of a country affects also the advertising campaign chosen by denim manufacturers.

Distribution channels may require adaptation in relation to the stage of development of each local market.

Competition in the denim market is very strong.

Increase in cotton prices: Beyond the decline in orders due to economic crisis, the industry has also faced rising cotton prices. Indeed, cotton price had flown in 2011, before falling back. In 2012, the average price of jeans imported into the European Union increased by 5.4% (7.70 euros), after rising 6.5% in 2011. Prices vary according to manufacturers. For example: Turkey and Tunisia (16,97€ ) China (5,5€).

SOCIAL:

Cultural differences are important: needs and fashions are different according to cultures. Brands have to adapt their products to these different needs.

Colors are a cultural dimension: for example, the white color is associated with death in China but black is the color of death in Europe.

Jeans are seen as second-skin: at the beginning, it was designed for workers and then for cow-boys.

TECHNOLOGICAL:

Development of online shopping.

Mobile applications for iPhone and Android: this strategy takes the denim market into an all new era.

Social-media marketing such as Facebook: Facebook enables to encourage consumers to connect to Facebook page of the brand and become fan. This strategy increases the sense of belonging to the brand.

Denim brands increasingly develop their advertising strategy.

According to Ademe (French Environment and Energy Management Agency), now there are new ways of producing jeans which enable to take care of the health and the environment.

ENVIRONMENTAL:

52% of the damages relating to the jeans occur during the production step. From the cotton crop until its delivery and its clothing manufacture, one denim will have consumed the equivalent of 25 liters of oil and resulted in a rejection of 2 kg CO2 in the atmosphere. (according to ADEME).

The jeans industry is faced with consumers who are increasingly demanding on environmental matters. The industry must provide sustainable and ethical products that respect the planet.

Reducing consumption of forest resources by using recycled material and reducing packaging.

LEGAL

Some jeans have received the label « Confiance Textile ». These products are certified Oeko-Tex (www.oeko-tex.com) and guarantee textiles without risks to health.

Passed in 2005, the European regulation REACH (Registration, Evaluation and Authorization of Chemicals) is now one of the main levers to force the textile industry to be « clean. » Such substances known under the acronym SVHC (substances of very high concern) are allowed in textiles at a lower 0.1% rate, as in all other sectors of production.